Zhongjin Company released a research report stating that the core key to the overseas mode of small games lies in the global demand for lightweight gameplay, and domestic waists actively participate in it. The success of the small game's overseas mode is jointly driven by the catalysis of the domestic industry, the global preference trend, and the competitive advantages of the manufacturers. In addition, the team believes that small games going overseas is expected to become a new market for domestic medium and small game companies to explore the overseas market, expand the manufacturers' overseas regions and user base, improve operational capabilities, accumulate experience, and expand the radius of capabilities of medium and small game manufacturers.

Small games going overseas are surging, with head products emerging and medium-sized game developers being the main participants. In 2024, the head product of small games going overseas, "Mushroom Brave Legend", rose to the top three in China's mobile game overseas income list. In addition, 37 interactive entertainment's "Xiao Yao Wen Dao" and Da Meng Long Tu's "King's Finger" have performed well. Zhongjin Company believes that the characteristics of small games going overseas are: 1) promoting lightweight gameplay that has been verified in the domestic market to overseas markets; 2) operating in overseas markets in the form of apps, differentiating from the competition logic of the domestic market. Its core advantage compared to competitors lies in its excellent lightweight gameplay; 3) domestic medium and small game developers are the main participants.

What makes the small game's overseas mode successful? It is driven by the catalysis of the domestic industry, the global preference trend, and the competitive advantages of the manufacturers. Zhongjin Company believes that the core catalysis lies in the rapid expansion of the domestic small game market in 2023, with more developers entering the small game track and a batch of excellent small game products emerging. The global market's preference trend for lightweight gameplay forms the basis for small games going overseas. Low threshold and positive feedback are the game entertainment demands of global users at present. From a competitive perspective, Zhongjin Company believes that the lightweight game track currently has weak competition, leaving room for medium-sized developers to go overseas to obtain volume. At the same time, manufacturers have accumulated years of experience in buying traffic and localizing operations for overseas games, which can be reused to boost product popularity for small games.

Pay attention to the amplification effect of small games going overseas on single product volume, and the promotion of the overseas capabilities and market development of medium-sized developers. From a product perspective, Zhongjin Company believes that first, it is expected to expand the single product revenue scale by overlaying multiple regions, and second, to consider that R&D costs have been covered by domestic small game versions, which is expected to slightly increase the level of profit margins after going overseas. From the perspective of manufacturers, Zhongjin Company believes that small games going overseas have opened up new paths/modes for overseas expansion: to do gameplay through "import-localization-export" or "domestic original-export", and to do operations through buying traffic and promoting products locally. Zhongjin Company believes that it may enlarge manufacturers' overseas regions and user base, improve operational capabilities, accumulate experience, and expand the radius of capabilities of medium and small game manufacturers.

Profit forecast and valuation

Maintain profit forecasts and valuations for related companies. It is recommended to continue to pay attention to the exploration and new product situation of medium-sized developers in the direction of lightweight and integrated gameplay going overseas, and be bullish on 37 interactive entertainment (small game product strength + overseas multi-regional distribution and operation capabilities), Kingnet Network (small game product strength + overseas publishing capabilities), Qingci Games (middle and low degree of integrated gameplay product strength + overseas publishing capabilities), etc.

Risk

Industry competition intensifies, industry policy changes, exchange rate risk, and macroeconomic changes affect game users' payment ability and willingness.